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Monday, February 26, 2007

Drugs derived from living cells, hailed for saving lives but known for their huge costs, could face generic competition under legislation gaining momentum in the newly emboldened Democratic-controlled Congress.

Many of the biotechnology drugs, first created in the 1980s when technology cleared the way for genetic engineering on DNA, are only now beginning to face patent expirations.

But the U.S. Food and Drug Administration is currently not prepared to approve generic versions of these or other expensive biotechnology-derived medicines because there is no regulatory pathway to bring what the industry calls "biogenerics" or "biosimilars" to market.

The 1984 Hatch-Waxman law that established the structure to win FDA approval of generic drugs is based largely on products derived from chemicals, such as the antidepressant Prozac or the popular cholesterol pill Zocor. Both were once blockbusters for the companies that developed them. Generic versions of drugs are now saving patients and taxpayers $10 billion a year, according to congressional estimates.

And opening the door to generic biotech drugs would save even more. Some of the drugs, like the anti-anemia drug Epogen, can cost more than $10,000 a year per patient. Other biotech treatments for cancer, multiple sclerosis and rheumatoid arthritis can cost even more.

"What many don't realize is that there is still no competition for one of the fastest growing and most expensive categories of drugs: so-called biotech drugs," said Rep. Henry Waxman, an influential California Democrat who is pushing generics legislation designed to bring cheaper biotech drugs to market.

Epogen alone cost the Centers for Medicare & Medicaid Services about $2 billion in its 2005 fiscal year, making it one of the federal government's most expensive outlays for a pharmaceutical, government records show.

If an approval process is established, tens of thousands of kidney dialysis patients, their employers and taxpayers may be in position to get a price break on Epogen in about four years. That's when California-based biotech company Amgen Inc., which launched the expensive product in 1989, will begin losing patent protection for the drug, which it calls one of the world's "first biologically derived human therapeutics."

"The biotech drugs really were not on the radar when Hatch-Waxman was approved," said Theresa Gerrard, a former FDA official who is now a regulatory consultant to drugmakers. "These biotech drugs are not as rare as they once were. They are mainstream medicines."

The prospect of making a cheaper version of Epogen might normally have the generic drug industry salivating at the idea of providing consumers with a cheaper alternative for an array of medicines for treating everything from cancer to multiple sclerosis.

Even if they sell it for half of what Amgen does, generics-makers would reap large revenues and U.S. consumers would potentially save hundreds of millions of dollars annually.

Generic biotech medicines could save health plans and patients more than $70 billion over 10 years, according to a recent study published by Express Scripts, a pharmacy benefit firm that is pushing for legislation that would require the FDA to establish guidelines for testing and approving generic biotech drugs.

The existing process to approve chemically derived generics, which is streamlined from the process used to approve the initial brand name drug, does not require clinical trials that involve testing in patients, and the application process takes only a few months.

Bills gaining momentum in Congress would create a streamlined path for generic biotech medicines that its supporters say would make drugs derived from living sources more affordable.

One of the bills has bipartisan support from Sens. Hillary Rodham Clinton (D-N.Y.) and Susan Collins (R-Maine). In the House, Rep. Rahm Emanuel (D-Ill.) and Rep. Jo Ann Emerson (R-Mo.) are among those leading the charge for the bill. A bill was introduced by Democrats in the House last fall but died under Republican control of Congress.

"These drugs are often life-saving," said Waxman, whose name is on the landmark 1984 generic drug bill that he co-authored with Republican Sen. Orrin Hatch of Utah. "Unfortunately, they also frequently cost tens of thousands of dollars per year, even hundreds of thousands. And there is no pathway for approving low-cost competing versions of these drugs, even after patents have expired."

The biotechnology industry is fighting the bill, saying their drugs are made in a more complex manner and therefore need more rigorous scrutiny and testing.

Brand name biotech companies say their medicines are derived from humans, animals and other natural sources and are not as simple to make as drugs made from chemicals that speed through an abbreviated application process.

"The legislative discussion on biosimilars must be focused on patient safety, based on sound science including clinical evidence, and consider input provided by scientists, physicians, patients, academia and the industry as part of a transparent process," said Amgen spokeswoman Kelley Davenport, adding that ongoing innovation will likely make generics outdated anyway.

The most likely process to get approved, according to industry analysts, will be modeled, in part, on regulations in Europe that make generic companies test biotech drugs.

Testing of generic biotech drugs in Europe can last five years but varies from drug to drug, companies working through the European process say. By comparison, it can take brand name companies several times that amount of time to develop just one drug at costs of hundreds of millions of dollars.

Lake Forest-based Hospira Inc. is working with a German-based drugmaker, Stada Arzneimittel AG, to bring a generic version of Epogen to market and is hoping to get an approval in Europe by the end of this year.

"Without a pathway established in the U.S. for the FDA to approve generic biologics, patients will not be able to get access to affordable alternatives to proprietary biologics," said Tom Moore, Hospira's president of global pharmaceuticals.

"If the Amgens and other [biotech companies] were indeed the only people who could produce these drugs, then why did they invest in these elaborate patent estates in the first place," Moore said.

Drugmakers like Hospira are confident that Congress will eventually approve a law creating a pathway for generic biotech drugs to win approval, possibly this year. With that in mind Hospira has begun early development of a generic Epogen for the U.S. market.

It plans to test its generic version of Epogen in its laboratories and in patients so that its testing will be completed in time to submit an application for FDA approval once Amgen patents begin to expire, assuming Congress has passed a law.

Hospira said it is investing undisclosed amounts of money preparing for biotech drugs to come off patent. It would not say what it planned to charge for a generic of Epogen.

"Despite the fact that there is no generic regulatory pathway we have come to the conclusion that it is inevitable," Moore said. "We would not be doing this unless we could not bring value in the marketplace for the patient."

Other companies, too, that have an expertise in either injectable pharmaceuticals or generics are expected to look at the generic biotech business. These include Teva Pharmaceutical Industries and Barr Pharmaceuticals Inc., industry reports say.

About Me

Cary J. Polevoy holds M.B.A and undergraduate degrees from Michigan State University. An active investor since 1965, Mr. Polevoy began his investment career as a stockbroker. He has also been a NYSE Supervisory Securities Analyst, director of research, mutual fund portfolio manager, and CEO/CFO of various small companies.
He has worked for Merrill Lynch, EF Hutton, RAC Advisors, Quantum Fund, The Broe Companies, McKinley Medical, among others.
Diagnosed with multiple sclerosis in 1995, he is the author of the book, "MS TOOLKIT - THE PATIENTS' & CAREGIVERS' GUIDE TO MULTIPLE SCLEROSIS."
DISCLAIMER: While I used to be a securities analyst, portfolio manager and registered investment advisor, I no longer am. Any opinions expressed herein are personal opinions and are not expressed as recommendations, advice or bets.